NOTE 10. BORROWED FUNDS

Short-term borrowings: A summary of short-term borrowings is presented below:

	Six Months Ended June 30, 2011
							Federal Funds
	Short-term						Purchased
	FHLB			Repurchase			and Lines
Dollars in thousands	Advances			Agreements			of Credit
Balance at June 30	$	-		$	1,092		$	955
Average balance outstanding for the period		-			932			954
Maximum balance outstanding at
any month end during period		-			1,233			955
Weighted average interest rate for the period		0.00	%		0.15	%		0.25	%
Weighted average interest rate for balances
outstanding at June 30		0.00	%		0.15	%		0.25	%

	Year Ended December 31, 2010
							Federal Funds
	Short-term			Short-Term			Purchased
	FHLB			Repurchase			and Lines
Dollars in thousands	Advances			Agreements			of Credit
Balance at December 31	$	-		$	629		$	953
Average balance outstanding for the period		13,724			1,084			1,364
Maximum balance outstanding at
any month end during period		45,000			1,787			3,617
Weighted average interest rate for the period		0.42	%		0.34	%		1.39	%
Weighted average interest rate for balances
outstanding at December 31		0.00	%		0.15	%		0.25	%

	Six Months Ended June 30, 2010
							Federal Funds
	Short-term						Purchased
	FHLB			Repurchase			and Lines
In thousands	Advances			Agreements			of Credit
Balance at June 30	$	-		$	1,787		$	952
Average balance outstanding for the period		27,412			1,326			1,782
Maximum balance outstanding at
any month end during period		45,000			1,787			3,617
Weighted average interest rate for the period		0.41	%		0.38	%		2.00	%
Weighted average interest rate for balances
outstanding at June 30		0.00	%		0.39	%		0.25	%

Long-term borrowings: Our long-term borrowings of $282,631,000, $304,109,000 and $361,175,000 at June 30, 2011, December 31, 2010, and June 30, 2010 respectively, consisted primarily of advances from the Federal Home Loan Bank ("FHLB") and structured reverse repurchase agreements with two unaffiliated institutions. All FHLB advances are collateralized primarily by similar amounts of residential mortgage loans, certain commercial loans, mortgage backed securities and securities of U. S. Government agencies and corporations.

					Balance at
	Balance at June 30,				December 31,
Dollars in thousands	2011		2010		2010
Long-term FHLB advances	$	161,799	$	238,538	$	182,375
Long-term reverse repurchase agreements		110,000		110,000		110,000
Term loan		10,832		12,637		11,734
Total	$	282,631	$	361,175	$	304,109

The term loan represents a long-term borrowing with an unaffiliated banking institution which is secured by the common stock of our subsidiary bank, bears a variable interest rate of prime minus 50 basis points, and matures in 2017.

Our long term borrowings bear both fixed and variable rates and mature in varying amounts through the year 2019.

The average interest rate paid on long-term borrowings for the six month period ended June 30, 2011 was 4.13% compared to 4.94% for the first six months of 2010.

Subordinated debentures: We have subordinated debt totaling $16.8 million at June 30, 2011, December 31, 2010, and June 30, 2010. The subordinated debt qualifies as Tier 2 capital under Federal Reserve Board guidelines until the debt is within 5 years of its maturity; thereafter the amount qualifying as Tier 2 capital is reduced by 20 percent each year until maturity. During 2009, we issued $6.8 million in subordinated debt, of which $5 million was issued to an affiliate of a director of Summit. We also issued $1.0 million and $0.8 million to two unrelated parties. These three issuances bear an interest rate of 10 percent per annum, a term of 10 years, and are not pre-payable by us within the first five years. During 2008, we issued $10 million of subordinated debt to an unrelated institution, which bears a variable interest rate of 1 month LIBOR plus 275 basis points, a term of 7.5 years, and is not pre-payable by us within the first two and one half years.

Subordinated debentures owed to unconsolidated subsidiary trusts: We have three statutory business trusts that were formed for the purpose of issuing mandatorily redeemable securities (the "capital securities") for which we are obligated to third party investors and investing the proceeds from the sale of the capital securities in our junior subordinated debentures (the "debentures"). The debentures held by the trusts are their sole assets. Our subordinated debentures totaled $19,589,000 at June 30, 2011, December 31, 2010, and June 30, 2010.

In October 2002, we sponsored SFG Capital Trust I, in March 2004, we sponsored SFG Capital Trust II, and in December 2005, we sponsored SFG Capital Trust III, of which 100% of the common equity of each trust is owned by us. SFG Capital Trust I issued $3,500,000 in capital securities and $109,000 in common securities and invested the proceeds in $3,609,000 of debentures. SFG Capital Trust II issued $7,500,000 in capital securities and $232,000 in common securities and invested the proceeds in $7,732,000 of debentures. SFG Capital Trust III issued $8,000,000 in capital securities and $248,000 in common securities and invested the proceeds in $8,248,000 of debentures. Distributions on the capital securities issued by the trusts are payable quarterly at a variable interest rate equal to 3 month LIBOR plus 345 basis points for SFG Capital Trust I, 3 month LIBOR plus 280 basis points for SFG Capital Trust II, and 3 month LIBOR plus 145 basis points for SFG Capital Trust III, and equals the interest rate earned on the debentures held by the trusts, and is recorded as interest expense by us. The capital securities are subject to mandatory redemption in whole or in part, upon repayment of the debentures. We have entered into agreements which, taken collectively, fully and unconditionally guarantee the capital securities subject to the terms of the guarantee. The debentures of each Capital Trust are redeemable by us quarterly.

The capital securities held by SFG Capital Trust I, SFG Capital Trust II, and SFG Capital Trust III qualify as Tier 1 capital under Federal Reserve Board guidelines. In accordance with these Guidelines, trust preferred securities generally are limited to 25% of Tier 1 capital elements, net of goodwill. The amount of trust preferred securities and certain other elements in excess of the limit can be included in Tier 2 capital.

A summary of the maturities of all long-term borrowings and subordinated debentures for the next five years and thereafter is as follows:

						Subordinated
						debentures owed
		Long-term		Subordinated		to unconsolidated
Dollars in thousands		borrowings		debentures		subsidiary trusts
Year Ending December 31,	2011	$	13,084	$	-	$	-
	2012		66,732		-		-
	2013		41,898		-		-
	2014		83,429		-		-
	2015		1,909		10,000		-
	Thereafter		75,579		6,800		19,589
		$	282,631	$	16,800	$	19,589